House Speaker John Boehner routinely offers this diagnosis of the U.S.’s fiscal condition: “We’re broke; broke going on bankrupt.” Trouble is, it’s not true, according to Bloomberg News.
“The U.S. government is not broke,” said Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co. in New York. “There’s no evidence that the market is treating the U.S. government like it’s broke.”
- The U.S. is able to borrow at historically low interest rates, paying 0.68 percent on a two-year note that it had to offer at 5.1 percent before the financial crisis began in 2007.
- Financial products that pay off if Uncle Sam defaults aren’t attracting unusual investor demand.
- Tax revenue as a percentage of the economy is at a 60-year low, meaning if the government needs to raise cash and can summon the political will, it could do so.
The U.S. does face long-term fiscal dangers — since 2009, federal debt measured against total economic output has increased by more than 50 percent and the White House projects annual budget deficits continuing indefinitely. But as long as we are paying our bills, we ain’t broke, Mr. Boehner.
- Section: Veritas